Google and Yahoo owe a lot of their growth to the pay per click phenomena of advertising. The majority of Google’s total income (estimates are around 98% of their total income) is from search based advertising.

Pay per click (PPC for short) is a simple system where advertisers bid on a keyword, and then when someone searches that keyword (often called a user query) on a search engine, the advertisers ad is displayed along with the usual search results. If a user clicks on the advertiser’s ad, then the advertiser is charged based on how much they are willing to spend per click.

Advertisers only pay when a searcher clicks on an ad, hence, pay per click.

Click fraud has been unofficially labeled as clicks on pay per click ads originating from illegitimate sources. This can occur for a large variety of reasons from advertisers competition to publishers wishing to line their pockets.

Click fraud has been widely discussed over the past year. The most recent mainstream press was from a Wired article that received some excellent discussion in a WMW thread.

It’s pretty common for search engines to be tight lipped about click fraud, detecting clicks, and what users can do about it.

While click fraud is an issue, so are traffic spikes that appear to be fraud - but aren’t. A syndicated ad onto the front page of CNN or ESPN can receive a huge traffic spike, unfortunately, often these additional clicks don’t always turn into additional sales.

News can also trigger these spikes. In fact, on the same page that Yahoo admits the potential for click fraud, they also acknowledge traffic spikes:

Some keyword markets have a lot of volatility in their quantity of clicks, sometimes leading to traffic spikes that might be interpreted as fraudulent activity. Imagine how many added clicks bidders for the term “Janet Jackson” received after the infamous Super Bowl incident. If you see an unexplained surge in traffic, it can often be related to a news story. Our Click-Through Protection team is trained to identify these click spikes and their possible legitimate sources.

This is a very accurate statement by Yahoo. On several occasions there have been large traffic spikes for niche keywords that appear to be click fraud based on historical search history. However, investigation into the traffic often shows why the spike happened and that they were legitimate visitors.

This is also one reason that it’s very important to stay on top of the news and your keywords. If the advertisers for ‘Janet Jackson’ had anticipated the additional traffic and paused those keywords, they wouldn’t have received clicks from those searching for additional info on the incident.

However, this isn’t to say one should always pause keywords when a story breaks. There are times that a news story can propel sales as well as additional traffic. One must determine user intent for the search on those keywords to make an appropriate decision.

Back to the click fraud issue. While Yahoo has made a few public statements (and many in private at conferences), Google has stayed very quiet about how they track fraudulent clicks. Yahoo has mentioned a few points, however, this is one of the more specific published pieces of information to date:

Yahoo! Search Marketing’s click protection systems are in operation 24 hours a day, monitoring each click and filtering out those that are questionable or clearly unqualified. To do this, we track search-and-click patterns across more than 50 data points—including IP address, users’ session information and browser information, and pattern recognition—to help detect invalid clicks.

50 data points is quite a lot . I’ve hard Google engineers discuss in private that they do snapshots of browser versions, screen resolution, if cookies and java are enabled, etc - and put together information about a system to help determine if someone moving through anonymous proxies is in fact the same system, hence, it could be related to click fraud.

Onto the juicy part, Yahoo admits no one can detect every fraudulent click.

From the Yahoo Search Marketing Handbook:

We acknowledge that no system, no matter how sophisticated, can detect every invalid click. While bid prices will ultimately reflect the true quality of the traffic, Yahoo! Search Marketing continues to spend substantial time and money to make sure that our technology leads the industry. To further our efforts, we also rely on, and encourage, our advertisers to bring possible invalid clicks to our attention.

This is a very interesting acknowledgment. It’s also very true. Click fraud done randomly with sophisticated technology is nearly impossible (if not completely impossible) to detect.

While the click fraud department probably receives both many cases of fraudulent and legitimate clicks, there have been many stories about Yahoo just giving refunds when the traffic doesn’t ‘appear right’. This could be a case where a word had a sudden spike in traffic for no reason. Of course, Yahoo doesn’t state if they found illegitimate clicks, but they go ahead and refund the money anyway as the traffic just doesn’t adhere to a normal pattern.

I do believe the media has made more out of click fraud that actually exists. Often these stories are spurred on by ‘click fraud detection companies’. Since these companies receive more clients the more they can convince the public click fraud is a huge issue, of course they like the spin that click fraud makes up a large percentage of all visitors.

In any case, it is interesting to note what Yahoo has published in this new handbook (which is an excellent read if you use Yahoo Search Marketing PPC).

The general consensus of click fraud in 2006 looks like this:

1. Click fraud will continue to be an issue.
2. The search engines will continue to develop better technology in fighting it.
3. Frauders will continue to develop better systems for perpetuating click fraud.
4. Advertisers sit in the middle, monitor their clicks, and suffer the consequences of fraud.

Many of the media stories about click fraud leave the impression that advertisers are very helpless in the issue. However, many marketers have stated that they adjust bids by conversion and ROI (return on investment) so click fraud is already taken into account based on the various markets. In these instances, the total dollars available to the search engines don’t rise. If click fraud were less prevalent, these advertisers would just bid higher as their conversion rates would be even higher.

So who does click fraud really hurt? Actually, everyone. Due to the media stories, less advertisers try search marketing. The less marketers, the less search engines make. And don’t forget the searchers - they do like (and click) on these ads (the proof is in Google’s net worth and advertisers ROI).

It’s good to see Yahoo acknowledge click fraud. Only by search engines and advertisers working together will it be stopped. One group alone doesn’t have enough data to see all the search and click patterns. Without all of the data patterns, there is no way to tell if clicks are legitimate or fraudulent. If everyone starts to work together in data collection and sharing, then click fraud will start to be a battle that the PPC engines can win.

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